House prices do not always rise!
“Home prices, like other prices, fluctuate. In many states, the median home price rose to
almost eight years of per capita income, which can put a great amount of stress on families
to make monthly mortgage payments. Real (inflation adjusted) home prices rose 0.4% a year from
1880 to 2004. During that same period of time, real stock prices provided a total return of 6.6%.”
Notice in the graph below, how real estate prices dropped from their high points around 1926, and did not recover their values until around 1947. Also notice that the Index presented below, shows an approximate annualized return of 0.47% from 1886 till 1947 a 61 year period. The annualized rate of return from 1891 – 1934, a 43 year period, was 0.00%.
Graph of Japanese Urban Land Prices 1980 – 2002